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The Newsboy Problem with Resalable Returns

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  • Mostard, J.
  • Teunter, R.H.

Abstract

We analyze a newsboy problem with resalable returns. A single order is placed before the selling season starts. Purchased products may be returned by the customer for a full refund within a certain time interval. Returned products are resalable, provided they arrive back before the end of the season and are undamaged. Products remaining at the end of the season are salvaged. All demands not met directly are lost. We derive a simple closed-form equation that determines the optimal order quantity given the demand distribution, the probability that a sold product is returned, and all relevant revenues and costs. We illustrate its use with real data from a large catalogue/internet mail order retailer.

Suggested Citation

  • Mostard, J. & Teunter, R.H., 2002. "The Newsboy Problem with Resalable Returns," ERIM Report Series Research in Management ERS-2002-89-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:268
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    File URL: https://repub.eur.nl/pub/268/ERS-2002-89-LIS.pdf
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    References listed on IDEAS

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    1. Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
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    Cited by:

    1. Mostard, J. & Teunter, R.H. & de Koster, M.B.M., 2003. "The distribution-free newsboy problem with resalable returns," ERIM Report Series Research in Management ERS-2003-068-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. de Brito, M.P. & van der Laan, E.A., 2002. "Inventory control with product returns: the impact of (mis)information," Econometric Institute Research Papers EI 2002-29, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Ketzenberg, M.E. & van der Laan, E.A. & Teunter, R.H., 2004. "The Value of Information in Reverse Logistics," ERIM Report Series Research in Management ERS-2004-053-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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    More about this item

    Keywords

    inventory; mail order retailer; newsboy problem; product returns; reverse logistics;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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